Credit Card Calculators

Credit Card Learning Center

Reward Credit Cards

Reward credit cards are now standard fare, and as many credit card
innovations launched to win business, offering rewards has now become a
cost of doing business.

Citibank is credited with launching the first reward credit card, the
AT&T Universal Card. But rewards were not all it offered; there were no
annual fees. That still applies today, along with 0% APR on balance
transfers for 12 months, up to 30 minutes in free phone calls, and two
free directory assistance enquiries each month. The card gives what the
company calls "thank you" points: five per dollar spent at supermarkets,
drug stores, gas stations and for certain AT&T consumer products, and
one point for all other purchases.

Further inducements include insurance against loss or theft of cell
phones and full coverage against unauthorized purchases made with the
card.

Cash at year's end
Discover Card, on the theory that cash is king, followed by paying cash
at the end of the year based on the total amount charged to their card.

Now, there are cards that offer as much as 5% cash back. You can even
earn money toward the purchase of a new car. GM's MasterCard earns 5%
toward the purchase of one of their vehicles, up to a maximum of $3,500.
There's also 0% APR on transfers for "six billing cycles", after which
the rate goes to 10.74%, 14.74%, or 16.74%, depending on
creditworthiness.

Low interest rates attract people who carry credit balances month after
month on their cards, but reward programs are attractive to those who
pay off their balances each month and who are therefore not affected by
interest rates.

Spending rewarded
One of the dangers with these cards is that they offer rewards for
spending. Spend more and the rewards come faster, and some people may be
tempted to spend larger amounts just because of this. This does not
encourage good personal financial management.

Some rewards come in the form of points, and these points may be
increased for shoppers at partner companies. Some banks put out
catalogues of fine gifts, but look for the "dollar" value of these
"gifts", and consider if you would buy them if you had to pay for them.
In other words, do you really want what's offered?

Other cards offer points toward free hotel stays, airline flights, and –
if you look hard enough – almost anything you can imagine.

Look at small print
Look at the small print to see if there are limits to the rewards (as
with GM), fees for exceeding your credit limit or for being late with a
payment. Also, check out the grace period – the time during which
purchases do not accrue interest. Thirty days used to be the norm, but
this period now averages 23 days, and some issuers have whittled that
down to 20 days. Some even have no grace period at all.

One other thing to watch out for: Some rewards cards carry hefty annual
fees. Compare these with cards from the same issuer, and decide whether
you really want to pay for the privilege of being rewarded for your
spending.